Taxpayer Protection Cap Clears N.C. House Committee

Raleigh, N.C. – A key committee in the state House of Representatives on Wednesday approved a constitutional amendment proposal for voters to decide this fall whether to lower the cap on North Carolina’s personal income and corporate tax from 10% to 5.5%.

Senate Bill 75 Const. Amd. – Max. Income Tax Rate of 5.5% passed the committee on Rules, Calendar and Operations of the House this week and would protect taxpayers from future rate increases by maintaining North Carolina’s successful approach to attracting jobs and growing the state economy this decade.

State House Speaker Tim Moore (R-Cleveland) said lowering the state’s income tax cap is essential to prevent future tax increases by Gov. Roy Cooper, who sought to raise income and corporate taxes in his 2018 spending plan:

“The governor’s budget proposal to raise taxes and still overspend into a $470 million budget deficit is an important reason North Carolina needs this constitutional amendment to protect taxpayers and maintain economic momentum,” said House Speaker Tim Moore (R-Cleveland).

If approved by voters, the state’s new tax cap of 5.5% would take effect on January 1, 2019.

Economic Success in North Carolina After Tax Reform

North Carolina has a record $2 billion savings reserve fund and a $356 million revenue surplus in 2018 following tax relief for families and businesses totaling more than $4 billion this decade.

Since 2011, North Carolina has a lower sales tax rate, income tax rate, and corporate tax rate under Republican leadership in the state General Assembly.

North Carolina was 1 of 12 states with a unanimous ‘AAA’ credit rating from all three major rating agencies in 2017 and recently enacted a savings reserve requirement praised by Moody’s Investor Service to “improve the state’s financial flexibility and its ability to respond to future contingencies.”

Last year, Moody’s Analytics rating agency also named North Carolina 1 of 16 states prepared for an economic recession.

“Constitutional amendments require a high threshold of support and voter approval, but protecting taxpayers is of immense and immediate importance to families and businesses in North Carolina.”

Lower Tax Cap Still Leaves Room for Financial Flexibility

North Carolina already has an income tax cap in its state constitution, and lowering it would still leave room for future rate increases, according to nonpartisan staff at the Fiscal Research Division.

Raising the personal income tax rate by just .25% would generate an additional $575 million per year, increasing the corporate tax .25% would generate an additional $240 million per year, and raising the sales tax by 1 cent could still generate an additional $1.6 billion per year, the nonpartisan staff told House members on Wednesday.

A representative for the state treasurer told the committee on Rules, Calendar and Operations of the House on Wednesday his office did not believe lowering the income tax cap in the state constitution would affect the state’s credit rating. Responsible spending and long-term financial solvency are the primary factors in North Carolina’s unanimous ‘AAA’ credit rating.

North Carolina Maintains Spending Priorities

North Carolina has the third fastest rising teacher pay in the U.S. over the last five years, according to the left-leaning National Education Association. The ranking doesn’t include the fifth consecutive teacher pay raise averaging 6.5% provided to educators in 2018.

North Carolina advanced 10 spots in national teacher pay rankings over four years, from 47th to 37th, following significant raises provided by the state General Assembly since 2014.

Correctional officers are receiving a fourth consecutive pay increase in 2018, for example, increasing the average salary of a maximum security correctional officer over $9,000 by 2019.

The 2018 state budget spends an additional $700 million per year on K-12 public education. North Carolina spends over a billion dollars more on education annually since Republicans gained control of the state legislature in 2011.

North Carolina ranks 5th in the country for per-student spending on public colleges and universities. A statewide ConnectNC bond to build new STEM facilities on university campuses is investing nearly $2 billion into higher education, with a cash flow reaching $40 million per month by 2019.